WASHINGTON — The second quarter gross domestic product report shows the expected rebound from the weather-induced slowing in the first quarter, though the magnitude of the changes, at a revised 2.1% contraction in Q1 and a 4.0% rise in Q2 was a little surprising.
On net there was still a slowing in the first half from a very fast growth pace (also revised) in H2:2013.
The Q2 upturn reflects more consumption, exports and inventories than in Q1. The Commerce Department assumed rising inventories and a slightly worse trade balance for missing June data.
In Q2, durables spending surged, led by motor vehicles and recreational goods, consistent with strong unit sales data for new cars. Durables had their best quarter since Q3:2009 after the recession caused pent-up demand.
Nondurables spending added to the growth in a rebound despite weakness in restaurant and gas spending. Services slowed though healthcare and recreation spending gained after cutting fractions from growth in Q1.
Measuring the effects of Obamacare has apparently been a challenge. Healthcare spending, pretty much considered a given as a contributor to growth, now shows negative contributions only in Q3:2011 and in Q1:2014, affecting services negatively.
Residential construction proved resilient after winter. Growth in this component was up 7.5% in Q2 after two negative periods. A business investment rebound was mainly in computers.
State and local government spending also is on the mend. Expenditures in this category posted a 3.1% increase after a 1.3% drop in Q1.
The inventory turn-around boosted growth by 1.66 points in Q2. Underlying real final sales still show a pattern that surged in H2:2013 and then slowed slightly in 2014.
Q2 GDP prices posted a 2.0% rise, the high end of trend.
Annual GDP revisions moved 2013 growth higher, and did not alter the economic picture of a H2 acceleration. 2010-14 average growth was little changed, though showing generally less consumption and more imports. From Q4:2010 to Q1:2014 the average annual rate for GDP growth was up 1.8%, the same rate as previously published.
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